Turkey 2020: on course for convergence

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This study, written by Markus Jaeger
and published by Deutsche Bank Research,
depicts plausible scenarios for the Turkish economy in the medium
to long term.

  • Turkey has in the past suffered from high levels of
    macroeconomic instability. Over the last ten years average economic
    growth has been modest. Sustained economic reform following the
    2000-01 economic crisis has however improved the outlook for
    economic stability and higher medium-term economic growth
  • The continuation of macroeconomic discipline and structural
    reform is likely to be driven by the prospect of EU accession. The
    agreement reached between the EU and Turkey regarding the start of
    accession negotiations in October 2005 is the first step in that
    direction. Risks of setbacks stem from both sides, however.
  • This study is to depict plausible scenarios for the Turkish
    economy in the medium to long term, rather than predict at what
    point in time accession will actually take place.
  • In our baseline scenario, medium-term real GDP growth of a good
    4% on average over the next 10 to 15 years is realistic, according
    to DB Research’s proprietary long-term growth model
  • While the continuation of economic reforms appears to be the
    most likely scenario, it is not, however, a foregone conclusion.
    Domestic political cleavages, setbacks on the IMF front and
    geo-political developments could yet undermine the upbeat economic
    outlook. We present two downside scenarios to account for this
  • If Turkey realises its growth potential over the coming decade,
    it will be a very different country and a very different economy by
    the time it accedes to the EU. True, it will still be one of the
    poorest EU economies on a per capita basis and will have the
    largest agricultural sector. But Turkey’s level of economic
    development will be comparable, in relative terms, to the levels
    reached by Poland in 2004.
  • The political and economic impact of EU convergence will be
    unambiguously positive, as Turkey will benefit from continued
    EU-supervised reforms, increased economic stability and higher
    foreign investment flows.
  • The banking sector in particular stands to benefit from
    enhanced stability and higher economic growth, and is likely to
    experience increased consolidation and foreign participation.

To read the full text of the study, visit the Deutsche Bank Research website.